The archived blog of the Project On Government Oversight (POGO).

Feb 15, 2011

JSF Likely Far More Expensive Than Aircraft They're Replacing

By Nick Schwellenbach

This morning, veteran defense aerospace reporter Bill Sweetman took a look at the different unit costs of F-35 Joint Strike Fighter (JSF) variants in the new fiscal year 2012 budget request. His findings suggest that the JSF fighters will be far more expensive—even more than previously believed—than the aircraft they are set to replace, which include the F/A-18, F-15, F-16, A-10, AV-8B and other planes. The budget request, unveiled yesterday, is “the first to fully reflect the major changes in the F-35 program that started early last year,” Sweetman wrote.

Sweetman found the following average per-unit costs, or APUCs:

F-35A: $110 million ($7.7 billion for 70 aircraft)

F-35B: $150 million ($2.71 billion, for 18 aircraft)

F-35C: $139.5 million ($2.79 billion for 20 aircraft)

In contrast, the U.S. is buying 28 F/A-18E/F Super Hornets for an APUC of $86 million—around 60% of the APUC of the F-35C. The F-35C is the JSF variant that is supposed to replace the Navy Super Hornet. Super Hornets are being purchased now because the JSF program is behind schedule and the Navy is hedging its bets because there could still be more delays. (Correction, 2/17/2011: The F-35C is not intended to replace F/A-18E/F. In the Navy’s future force structure, its F/A-18A/C squadrons will transition to F-35C—to lead to the eventual 10 carrier air wing (CVW) complementary force mix of 24 Block II F/A-18E/F and 20 F-35C.)

There are, as always, caveats to these figures. Lockheed Martin, the prime contractor for the F-35, may (and probably will) argue that these costs could come down over time because of the “learning curve.” Lockheed will also likely argue that the per-unit price will come down as the U.S. and other customers buy larger amounts of aircraft in the future, creating economies of scale. However, it remains to be seen how much more the F-35 will benefit from economies of scale. As Sweetman noted, the F-35A alone will be rolling off the line in higher quantities than the Super Hornet.

There is also reason to doubt the learning curve argument, argues Winslow Wheeler, a defense expert at the Center for Defense Information. Last year, Wheeler wrote that projections that the learning curve will bring per-unit F-35 costs down should be viewed with suspicion:

The last 50 years of actual DOD aircraft cost history, especially of “stealth” aircraft, do not treat the Carter-Fox estimates, and the prevailing conventional wisdom, very politely, however. The absence of any such progressive “learning curve” in unit cost has been thoroughly demonstrated by the analysis of Chuck Spinney, using actual procurement data.

These APUCs also do not reflect development costs—and the U.S. is spending more to develop the F-35 than was originally estimated. APUCs also do not reflect the life cycle costs, on a per-unit basis, of the aircraft. This is no small matter and has grave implications for the fiscal sustainability of American tactical aviation.

Keep in mind that the development and production phases of the F-35 program could cost a total of $382 billion, according to one Pentagon estimate. But compare that with life cycle costs. The Government Accountability Office (GAO) estimated in 2008 that, including life cycle costs, the F-35 program will cost more than $950 billion. The lion’s share of life cycle costs is the cost of both operating and maintaining the aircraft. If the operations and maintenance costs are substantially higher than the GAO estimated, the program easily may have moved well beyond the $1 trillion mark.

It looks like that may be the case. Recently the Air Force indicated that it agrees with the Navy’s assessment that F-35 aircraft could cost 30 to 40 percent more to maintain and operate over the course of the program’s lifespan than the aircraft it is replacing. This is a big problem because the F-35 was supposed to be cheaper to operate and maintain than the legacy aircraft it is supposed to replace. According to DoD Buzz:

A source familiar with the issue said that the Air Force believes a study performed by the Navy one year ago looks increasingly accurate, based on preliminary data the service has compiled. Buzz readers will remember that the Navy study found the F-35 would cost between 30 percent and 40 percent more per plane than does the current F/A-18 fleet. Since one of the primary goals of the F-35 program, with its web of international partners, was to lower maintenance costs by achieving economies of scale through large program buys by a significant number of countries this would call into question one of the fundamental goals of the program.

Comments

Aviation Weekly on December 16, 2010 did an article on F-35 “target prices.” Bottom line is that prices for these things are all over the place.

According to the Joint Program Office (JPO), the recently signed LRIP 4 contract (LRIP 4 is the first “fixed-price” incentive contract for the F-35) sets target prices as follows:
• F-35A (CTOL) $111.6 million
• F-35B (STOVL) $109.4 million
• F-35C (carrier) $142.9 million

These prices did not include the F135 engine, as Pratt & Whitney is still negotiating its LRIP 4 contract.

LRIP 3 price at around $19 million for the CTOL engine and $38 million for the STOVL engine including Rolls-Royce lift system. Pratt offered a price reduction of at least 10% for LRIP 4 and has likely been pushed lower as it has also gone to a fixed-price contract.

But here is the real kicker. The “fixed-price” contract is not really a fixed price contract. This is where it gets fun.

Under the terms of the LRIP 4 contract, Lockheed and the Pentagon will share any costs above the target price 50:50, with a ceiling on what the government would have to pay of 120%. So a:
• F-35A ($111.6M) could cost the DoD up to $133.9 million (additional $22.3M)
• F-35B ($109.4M) up to $131.3 million (additional $21.9M)

(Again, that excludes engines). Beyond that Lockheed carries the cost.

Rest assured, as the R&D gets dragged out even more and more and more countries decide these costs are unaffordable (as any common sense, fiscally responsible nation will do), the unit costs to the American taxpayer will sky rocket. Then, when the program looks like it is really in trouble, we will all hear the magic words…

“But we already have all these sunk costs”

Bottom line is Lockheed doesn’t care. This is their business model. They will have made a ton of money off of the $40B + R&D phase (like they did with the Presidential helicopter) and enough senior military and DOD civilian retirees will be employed (or promised employment) that the gold will keep rolling in. Of course, then we will get to the fun part which will be all the added money Lockheed will get paid to fix the aircraft so that they can do what they were supposed to do in the first. Don’t forget. This is the company that sold a “commercial-off-the-shelf C-130J that was going to cost the same as the C-130 it would replace (somewhere between $30-$40M) that so far has cost the American taxpayer over $90M per aircraft to fix so they can actually be deployed for combat.

The JSF-35, like the F-22, is yet another expensive aircraft that the services do not need. We've lost about two fixed-wing aircraft due to hostile fire in the last ten years. When was the last time an infantryman got killed? Was it today or yesterday? My point is that the casualties are vastly disproportionate. If we're going to spend the money, do it to better protect the people on the ground, not in the air where even with our existing technologies we are far, far superior to our opponents, and will remain so for decades to come.

This assessment of the Joint Strike Fighter is completely misguided. New technologies cost money, and no price can be placed on maintaining our national security in an increasingly dangerous world.

The F-35C will replace the AV-8B Harriers our Marine pilots now fly, many of which are 20-30+ years old and depend on inadequate, obsolete technology. The STOVAL-capable F-35C Lightning II is absolutely critical to the Marine Corps' expeditionary mission both now and in the future.

"We would be better off if the Department of Defense funded 2 or 3 companies to develop aircraft all the way to production. At least then there would be some competition to drive down development costs and schedule slides."

That was going to be exactly my comment!
Thanks DFENS!
Think anybody in Congress/Administration will get the message?

1. Mr. Secretary and Chief, I am honored to announce that after 25 years of collaborative effort, a key milestone for the F-22A is behind us. The integrated 1FW/192FW at Langley possesses sufficient Raptors, equipment and trained Airmen to provide Air Dominance for the Joint Force for many years to come. The Raptor is ready for global CFACC tasking ahead of schedule and I declare Full Operational Capability for the F-22A as of 12 December 07.

2. Our success at Langley is the showcase example of our shared vision for the Total Force Integration of tomorrow. 1FW Active duty and 192FW Virginia guard Airmen fly and maintain the world's premier 5th generation fighter with seamless integration, superior dedication and unmatched synergy. Team Langley represents the type of readiness and organization we need to maintain a dominant Joint Total Force for the future.

//Signed//
JOHN D.W. CORLEY
General, USAF
Commander

Apparently those in charge of the USAF think 25 years is a scortchingly fast development time. These guys are obviously patting each other on the back for such a huge achievment. It is also obvious that any real reform of the way we procure weapons is not going to come from this bunch of butt kissing morons!

We would be better off if the Department of Defense funded 2 or 3 companies to develop aircraft all the way to production. At least then there would be some competition to drive down development costs and schedule slides. If we continue on the road we are on, out defense costs will continue to cost more than they did during the Cold War, and the schedules will continue to slide out from the current 2 to 3 decades. That's just insane. Yet even given the fact that these defense contractors continue to pull down record profits, we don't do anything to change the system. We use the same failed approach time after time, each time hoping for a better result. Instead, each time we get a worse result, and still we don't change a damn thing.